Time for a smile as things get better

Thursday 2 September 2010 11:09 BST

The latest business confidence monitor from the Institute of Chartered Accountants and Grant Thornton says that businesses in the London area expect turnover growth of 6.3% next year and gross profits growth of 5.8%. The survey also reports that profits are growing again for the first time since the final quarter of 2008.

Continuing the theme of recovery, it adds that average total salaries rose for the first time in more than a year, and are expected to increase by a further 1.9% over the next 12 months.

The outlook for investment is more positive, with businesses in London forecasting capital investment to grow by 2.1% over the year while research and development budgets are expected to grow by 1.4%. Across the board, customer demand has improved significantly. Sales volumes are up, and there has been a drop in the number of firms worried about access to capital and bank finance.

Nothing in the survey is a negative. Nothing appears to be getting worse. All the figures quoted would indicate a quickening pace of recovery, not a slowdown. But the headline on the press release focused on a decline in the level of business confidence, where the index has slipped from 28.1 in the last quarter to 25.9 now. "Slowdown in the recovery indicated," it warns. This is more than just a headline writer's foible because it plays to a national mood that looks to find a black cloud behind every silver lining.

All the facts in the survey clearly show things are getting better but it would appear that people don't believe the good news even when they see it, presumably because Chancellor George Osborne's relentless message on austerity is sapping their confidence.

If this continues, it will make a difficult situation much worse than it needs to be. The Government urgently needs to wind down its cataclysmic rhetoric and give people reason to hope.

The art of PR at Threadneedle

At a time when so many companies have used the recession as an excuse to cut back on their philanthropy and sponsorships, it is heartening to see fund management group Threadneedle continue with its good works.

Last night was the preview and tonight is the opening night of an exhibition at the Mall Galleries of entrants for one of the most valuable prizes in the art world — the Threadneedle Prize for figurative art. It is well worth a visit.

Unfortunately, Threadneedle has not quite shaken off the curse of shareholder value, and feels obliged — possibly for PR reasons — to justify the spend in terms that emphasise how the sponsorship adds value to the business. Artists look at the obvious things in the world in a different way, it says.

They teach us to see things that would otherwise remain unseen, and to challenge our view of the world. These are also the skills and talents needed of a fund manager if he or she is to deliver exceptional returns, Threadneedle helpfully adds.

While anything that stops fund managers behaving like lemmings and helps them think for themselves is to be encouraged, this does sound just a little bit contrived.

I would be happier if the company simply had the confidence to say that it sponsored the prize because it believes it was a good thing to do.Although it may obtain some benefit in enhanced name recognition, and it may get a useful boost to its reputation at a time when financial services are generally ill thought of, either of those would be a bonus.

I would like the truth to be that Threadneedle gave the prize because it wanted to give something back to society, and its shareholders can afford it.

But what a pity it is that, in these boringly politically correct days, even if that is what companies believe, they feel they can't say so.

A drugs cure for financial services

Sir Richard Sykes, when he ran GlaxoSmithkline, was fond of saying that the financial services industry had a great deal to learn from pharmaceuticals. In particular, he said, it needed to adopt the drug companies' approach to product safety and efficacy.

His observation came to mind this week with the news from AstraZeneca that it had a problem with the US drugs watchdog over a respiratory treatment it is developing.

The regulator is apparently demanding more evidence that the drug works as the company hopes it will, and as a consequence Astrazeneca is considering whether it is worth persisting with the development. It is no easy decision. If it scraps the drug, it could lead to the write-off of close to £300 million spent so far. That is a big hit but it is the price the industry pays for maintaining the trust of the public.

Contrast this with the financial services industry and the products it develops and sells. There are minor restrictions on how these are sold, but very little sanction if the product fails to do what it says on the tin.

It is quite common for financial products to fail totally to deliver what is expected of them, or to behave in wholly unpredicted ways when markets don't move as it was assumed they would.

While the FSA does what it can to protect consumers, the idea that it would ban a product and cost, say, an insurance company or a bank several hundred million in wasted development expenditure is not credible.

The financial services industry is understandably worried that it has lost the trust of the public. It has yet to understand the scale of the effort needed to win that trust back.